Ofgem proposes stable pension allowances for energy networks

The UK energy regulator, Ofgem, has proposed keeping pension allowances for RIIO network companies broadly unchanged following its 2026 reasonableness review. The regulator noted that funding positions for these schemes have generally improved since the 2023 review, with eleven schemes reporting surpluses compared to five in the previous period.

Under the proposal, network operators have a defined benefit pension obligation of £25.6 billion against £26.1 billion in assets, representing a £0.5 billion surplus. Ofgem stated that these allowances are ultimately funded by consumers through energy bills. The proposed allowances aim to maintain an overall net recovery position consistent with the 2023 review.

The Government Actuary’s Department conducted a high-level review of the methods and assumptions used in recent valuations and reported no major concerns. As funding positions improve, Ofgem emphasized that the management of surpluses is becoming increasingly important. The regulator is seeking views on its draft notice and provisional values by 13 November 2026, with final decisions expected to take effect from 1 April 2027.